Amortization
Paying down a loan with equal periodic payments split between principal and interest.
On a fixed-rate amortized loan, every payment is the same dollar amount — but the split between interest and principal shifts. Early in the term, most of each payment goes to interest. Over time, the share flips and most goes to principal. The amortization schedule shows month-by-month exactly how this happens.
Related
- Principal — The amount you borrowed (or still owe).
- Interest rate — The percentage charged annually for borrowing money.